Nordea at Slush
Nordea at Slush

How to choose the right investor for my startup?

Your new startup has an unbeatable business idea but lacks the funding to develop it. There are numerous funds that invest in startups, but which is the right one for you?
Finnish

Investor Speed Dating

When the ongoing pandemic has closed down all live events, Nordea Startup and Growth opens up the opportunity of virtual matchmaking. Nordea Investor Speed Dating brings together high-growth startups and scaleups and local and global investors – safely online. If you are a startup or scaleup looking for the right investor for your brilliant business idea, read more about this matchmaking event and send in your application.

Deal Flow Manager Teija Nousiainen from Nordea tells us what approach to take when choosing an investor.

Be clear about what you want from an investor

Before contacting a potential investor, take the time to consider what is important for you. When seeking an investor, you are in fact looking for a business partner who will also become an owner of the company. How much financing are you looking for, in which direction do you want to take your startup and what are the ingredients needed for your company’s growth? With a clear set of criteria, it’s easier for you to start searching for the right kind of investor.

“Once you’re face to face with investors, it will be easier for you to align your expectations with theirs if your own ways of working and goals are crystal clear,” says Nousiainen.

Does your startup have a competence gap that an investor could help fill? Do you need experience or a wide network of contacts? Investors are often very well-connected people who can open new doors of opportunity for your business.

“Money is obviously important, but investors prefer that it’s not the only thing you’re looking for,” she adds.

Teija Nousiainen 2560x1440 3

Money is obviously important, but investors prefer that it’s not the only thing you’re looking for.

Teija Nousiainen, Deal Flow Manager, Nordea Startup & Growth

Key startup terms

Deal Flow Manager = A person who matches potential investors with startups to develop the latter into profitable investments

Startup = A nascent company seeking growth

Scaleup = A rapidly growing startup

Venture capital = A form of private equity financing

SaaS = Cloud-based software provided as a service, replacing the traditional need to buy licensed services and install them on desktops

Angel investor = Usually a private individual who invests in an early-stage startup

Family office = A private investment firm owned by a wealthy family

CVC = Corporate venture capital, a company that invests private equity in companies that are not listed on the stock exchange (particularly startups and scaleups)

Approach people and trust the personal chemistry

Most startups approach investors directly at events, through contact forms or in forums like LinkedIn. Wherever there are people, there are also investors. However, initially, it may be hard for you to differentiate yourself from other startups.

A startup doing a round of financing can use Nordea’s Deal Flow Manager service, which matches startups with investors in Finland, the other Nordic countries and the rest of Europe.

“We know what kind of investments funds are looking for, allowing us to match new startups with investors,” says Nousiainen.

Matchmaking can take place also at the investor’s initiative, especially if a startup has succeeded in achieving visibility organically. Investors are looking for a great idea that will develop into the next great global growth story – but at the same time, investors need to believe in the team behind the startup.

“When choosing an investor, it’s crucial to get along with them and to have a shared vision of the company’s future. In the startup ecosystem, everyone wants to help one another: the company has the idea and the investor the resources for commercialising it and forming contacts,” she says.

“A smooth investor-startup relationship may also be built on two completely different sets of competences or ways of working, but there must always be a good personal chemistry when working together. Conflicting visions will make the cooperation difficult.”

Examine the investor’s portfolio

Some funds have an investment strategy that focuses purely on financing companies in a certain sector, like food technology or pharmaceuticals. When looking for the right fund, you should check the investor’s website and examine its portfolio. Which companies in your startup’s sector has the investor funded, and how have they performed?

“An experienced investor in your sector could be the perfect match for your startup. In general, all investors are seeking SaaS technology (Software as a Service), which is easily scalable and interests a lot of people,” Nousiainen says.

“An experienced investor in your sector could be the perfect match for your startup. In general, all investors are seeking SaaS technology (Software as a Service), which is easily scalable and interests a lot of people.”

Teija Nousiainen, Deal Flow Manager, Nordea Startup & Growth

Find the right kind of financing combination

The first investor in a nascent startup is usually an individual angel investor. Angel investors are usually the first persons to fund a startup after the founders’ family and friends. In addition, a startup can seek crowdfunding, an arrangement where many individual investors provide financing but the founders retain full ownership of the startup.

The most common form of financing for startups are venture capital funds that collect capital for investment from, for example, institutional investors, businesses and the public sector.

“And of course it’s good to remember bank loans, family offices and CVCs, too. Different forms of financing don’t rule out one another. So if you’re seeking, say, five million euros, you may obtain some of it from a venture capital fund, and some of it might be worth obtaining in the form of a bank loan,” says Nousiainen.

 

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